Earnings season is upon us, and over the next few weeks we'll be bombarded with all sorts of information from thousands of companies. We asked three of our analysts which stocks they plan on watching closely this earnings season. Here's what they had to say.
Dan Caplinger: I'll be keeping my eyes on credit card network giant Visa (NYSE:V) this earnings season, with the company slated to report on April 30. Most investors expect the Dow component to report relatively flat earnings from year-ago levels, with revenue growth of about 5.5% representing somewhat of a pause from faster growth rates in the past.
Visa's earnings have implications well beyond the credit card industry. Because Visa doesn't issue any cards of its own, it bears no credit risk, instead just collecting transaction fees based on the amount of payment volume that runs through its card network. That makes Visa less sensitive to the changing creditworthiness of cardholders, but it does mean that the company relies on consumers to spend more with their credit and debit cards in order to drive its own profits higher.
In addition, a closer look at Visa's results should give some hints about macroeconomic conditions in different parts of the world. The card network provider isn't as well-known as rival MasterCard for its international business, but Visa still has global scope, and its results will reveal spending patterns in its geographical segments around the world. By keeping your eye on Visa's results, you should get a good gauge on the health of consumers not just in the strong U.S. market but also internationally in weaker economies across the globe.
Matt Frankel: One stock I'll be watching closely this earnings season is JPMorgan Chase (NYSE:JPM), which along with Wells Fargo will kick off earnings season for the financial sector when it reports on Tuesday.
The first companies to report from each sector can usually set the tone for earnings season, and this is definitely true in the banking sector. Last quarter, JPMorgan Chase posted disappointing results, and rivals Citigroup and Bank of America followed shortly after.
One big reason I'll be watching JPMorgan Chase more closely than Wells Fargo is the bank's exposure to trading revenue, which has been a negative point for investment banks for some time now. Recent data indicates trading revenue could be up substantially so far in 2015, with JPMorgan's own analysts projecting a 7% overall increase in investment banking income.
Some analysts are projecting even stronger gains. For example, Barclays is calling for a year-over-year gain of more than 15% in overall trading revenue.
Now, a larger-than-expected increase in trading revenue probably wouldn't be a huge boost for JPMorgan, which gets only about 15% of its revenue from equity and fixed-income trading. However, strong trading numbers from JPMorgan could be a sign of a great quarter for investment banks such as Goldman Sachs and Morgan Stanley, both of which are heavily dependent on trading revenue.
Gilead Sciences made a huge splash last year, when it launched two instant blockbuster hepatitis C drugs: Sovaldi and Harvoni. Thanks to the rapid uptake of those drugs, Gilead Sciences sales soared 122% to $24.9 billion in 2014.
That's eye-popping growth for a company of Gilead Sciences' size, but investors should recognize that growth will be a lot harder to come by this year. That's because the year-over-year comparisons will be tougher this year than they were a year ago, but it's also because AbbVie launched its own hepatitis C drug, Viekira Pak, in December. Viekira Pak's approval led to a price war with Gilead Sciences that resulted in steep price discounts in exchange for exclusivity deals with healthcare payers.
The first quarter's results will give investors a peek into just how painful those discounts have proved to be, and they'll also offer up insight into whether exclusivity deals that remove rationing of access to hepatitis C medications offsets those headwinds. Additionally, investors will be better able to model for Viekira Pak's impact on market share. Since there are billions of dollars at stake, Gilead Sciences' earnings report rates must-watch status.
Dan Caplinger has no position in any stocks mentioned. Matthew Frankel owns shares of Bank of America. Todd Campbell owns shares of Bank of America and Gilead Sciences. The Motley Fool recommends Bank of America, Gilead Sciences, Goldman Sachs, MasterCard, Visa, and Wells Fargo. The Motley Fool owns shares of Bank of America, Citigroup Inc, Gilead Sciences, JPMorgan Chase, MasterCard, Visa, and Wells Fargo. Try any of our Foolish newsletter services free for 30 days. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy.